TalkTalk rockets on Dido's departure

Fourteen months ago, we asked if chief executive Dido Harding was "all TalkTalk". Then, the telecoms and media company was reeling from a damaging cyber-attack, and confidence in top brass was at rock bottom. A partial recovery was short-lived, and the share price has just neared a five-year low.

But Harding chose TalkTalk's third-quarter results to announce her departure after seven years at the helm. Current chairman Charles Dunstone, founder of Carphone Warehouse which spun out TalkTalk in 2010, will become executive chairman in May after leaving Dixons Carphone.

Tristia Harrison, who looks after the consumer business, takes over from Harding, and Charles Bligh at the corporate division is chief operating officer.

"After seven extraordinary and fulfilling years, during which we have transformed TalkTalk's customer experience and laid the foundations for long term growth, I've decided it's time for me to start handing over the reins at TalkTalk and focus more on my activities in public service," said a confident Harding.

"A tireless, energetic and effective force for good from the day she joined TalkTalk", is how a gushing Dunstone described the under-fire CEO.

But shareholders who bought in the past five years will be out of pocket. Even after today's 8% rally, TalkTalk trades near its lowest levels since mid-2012.

And business is hardly booming.

BT and Sky have eaten into TalkTalk's share of the home broadband market, and Vodafone could certainly increase the competition here. TalkTalk has also been busy simplifying tariffs, annoying many existing customers.

As customer churn increased during the third quarter, TalkTalk lost a net 42,000 customers during the period and revenue fell over 5% to £435 million. Average revenue per user (ARPU) fell 3% year-on-year from £28.91 to £28.05.

Cash profit for the year to March 2017 will meet forecasts, however - guidance is for about £320-£360 million - and shareholders will still get a final dividend of 10.58p a share.

Add that payout to the 5.29p interim dividend, gives shareholders a yield for the year of over 9%.

Still, in December broker UBS downgraded expectations for ARPU, which, in turn, caused a cut in revenue forecasts of 3-5%, cash profit by 9-15%, and earnings per share by 15-25%. That meant UBS slashed its price target from 215p to 160p.

"We think concerns around TalkTalk's ability to sustain the subscriber base and grow ARPU will likely continue to overhang the stock in the near-term," argued the broker, "but see the long-term potential if TalkTalk is able to execute on its cost programme and successfully define its position in a converged UK fixed-mobile market."

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